Figures reported last week by the Office for National Statistics showed a 40.7% monthly drop in the export of goods to the EU, along with a 28.8% fall in imports from the bloc as well. As the largest fall since records began, our members are calling on the Government to take action to ensure the UK's significant drop in goods trade with the EU avoids becoming a permanent fixture.
In contrast, there was a fractional 0.2% increase in goods exports to non-EU countries, with an overall monthly 19% drop in overall UK goods exports. Services trade meanwhile took less of a hit, with a 0.9% general decrease in exports eclipsed by a 2.4% drop in the import of services. In total, the UK's exports in January fell 11.8% and imports dropped further by 17.6%.
Even taking account the December start to lockdown and stockpiling increase in the months leading up to January and Brexit proper, these figures make for depressing reading. The fact that services trade was far less affected and goods exports to non-EU rose marginally all in the same period reflects the particular impact that disruption from new Brexit changes has had.
Here at the IoD, we have long warned of the potential for a perfect storm of variables to collide in giving businesses so little time to adapt to new trading arrangements with the EU. Unfortunately that seems to have come to pass.
The challenge now is for UK Government to take steps in areas it can control to ensure this drop in trade with the EU does not become permanent, and negatively affect our wider export capabilities in the longer term.
While these figures were no doubt impacted by other variables like Covid disruption and mitigating changes to trade in the run-up to January, recent figures from EU countries showing a similar drop in trade with the UK put the onus on both sides to work together to ensure the impact on trade is a temporary blip rather than a permanent decline.
Indeed, our own research has found nearly 20% of business leaders who trade with the EU stopped doing so in January. A survey of over 900 directors saw just under 1 in 5 of those trading with the EU report their commercial organisations had halted doing so during this period.
This cohort was narrowly split between those who indicated they had stopped trading temporarily and those who reported it to be a permanent cessation. Directors selling both goods and services were most likely to have halted EU trading overall, with those selling services being more likely to do so for good relative to goods-only traders. Similarly, those in financial services were far more likely to be permanently stopping EU trade, and few reporting this in manufacturing (with more doing so temporarily).
Businesses are also clearly focused on the more immediate challenges still posed by the impact of the end of transition; at 62%, nearly three times as many report seeing no opportunities out of Brexit as those who do (23%). However a notable minority also indicate uncertainty over this in the Don’t Know category (15%), reflecting the degree to which the UK is still early on in the adjustment phase.
Finally, among the 77% of IoD members who trade internationally in some form, just over a quarter indicate they have actively increased or plan to pursue more opportunities with non-EU markets in light of Brexit. A third report their were doing this anyways regardless of the UK’s exit, while 40% say Brexit will have no bear on their wider trade engagement.
There is help available (not least of which from the IoD and Business Wales) but the facts are simple. Business wants to see a twin-track approach to stabilising and repairing our trade with the EU, while robustly pursuing new deals with other countries that will unlock new markets and cut costs to trading with old friends. To help industry recover and build back better, going global must look both near and far when it comes to the needs of our economy.